Question

Jilk Inc.'s contribution margin ratio is 60% and its fixed monthly expenses are $42,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $127,000?

Answer 1

Answer:

1)

Company's net operating income            = ( Sales x contribution margin ratio )   (-) Fixed Expenses            = ( $ 127,000 x 60% ) (-) $ 42,500           =   $ 76,200 (-) $ 42,500           =   $ 33,700

Company's net operating income         =   $ 33,700

2)

Contribution Margin per Unit            = Contribution Margin / No. of Units Sold            =   $ 319,200 / 8,400 Units            = $ 38 per Unit

Total Contribution Margin, when Units sold are 8,200 units             = No. of Units Sold x Contribution Margin per Unit             =   8,200 units x $ 38 per unit             =    $ 311,600

Total Contribution Margin     =    $ 311,600